Costco Wholesale Corporation (NASDAQ:COST, XETRA:CTO) shares fell about 4% to $913 on Wednesday after the warehouse retailer reported a moderation in June comparable sales growth, though Bank of America analysts maintained their ‘Buy’ rating, arguing the company's value-focused strategy and affluent customer base should continue to support market share gains.
For the five weeks ended July 5, total sales rose 10.6%, while US comparable sales excluding gasoline increased 7.6%. Bank of America noted the result represented a slowdown on both a one-year and two-year stacked basis following a stronger May.
The analysts wrote that Costco's "philosophy of leading with value and its weighting towards a higher income consumer gives us confidence share gains across categories will continue."
Non-food comparable sales increased by a mid- to high-single-digit percentage, driven by jewelry, home furnishings and major appliances. Management also highlighted higher prices in consumer electronics and appliances due to inflation in memory chip prices.
Fresh food comparable sales rose by a mid-single-digit percentage, supported by bakery and meat, while food and sundries posted low- to mid-single-digit growth led by food, candy and frozen products.
Overall inflation remained in the low- to mid-single-digit range, with food inflation at the lower end due to egg price deflation and non-food inflation at the higher end because of rising memory prices.
Customer traffic increased 3.2% during the month, easing from 3.9% in May, while average ticket growth excluding gasoline and foreign exchange was 3.7%, compared with 4% in the prior month.
Bank of America also noted Costco is now lapping the rollout of extended shopping hours introduced last July for executive members and later for all members. Management previously estimated the additional hours contributed roughly one percentage point to weekly US sales following their introduction.
Elsewhere, ancillary sales growth slowed as gasoline prices eased, while comparable sales growth moderated in Canada and other international markets. Digital comparable sales remained strong, rising 21.5% in June and improving sequentially from the previous month.
The analysts also noted Costco shifted its member appreciation days to coincide with Amazon's Prime Day and other competing promotional events.